JACKSONVILLE, Fla. – Beginning Jan. 1, alimony will no longer be tax deductible due to a 2017 tax overhaul enacted by President Donald Trump.
Alimony payments are separate from child support. They are the payments that someone gives to an ex-spouse who earns less money.
Right now, the ex-spouse paying they alimony gets a tax deduction, and the ex-spouse receiving the money pays a tax on the money received. But the tax change eliminates both the tax and the deduction.
The alimony deduction repeal would affect divorces carried out after Dec. 31, 2018. The new rule wouldn't affect anyone already paying alimony. But it'll mean big changes for divorce proceedings in the years ahead.
“That person paying $60,000 a year in alimony at a $200,000 total income is going to have to pay taxes on $200,000, despite paying $60,000 in alimony," said Joseph Alvarez, associate attorney with Zisser Law.
Couples working out prenuptial agreements could also be impacted by the tax overhaul. Divorce lawyers say prenuptial and postnuptial agreements typically contain clauses that outline what alimony would look like, should the couple get divorced.
Until this point, those clauses have typically been drafted assuming the alimony tax deduction will be in place.
“Usually the tax deductible payments currently are kind of like a wiggle room for somebody to bite the bullet and pay alimony, but what it means basically for the government is they’re going to see an increase in tax revenue next year, so it is going to affect possibly coming to an agreement on alimony," Alvarez said.
Alvarez said any change made to alimony agreements already in place will have to have the current tax law in their language to still get the tax benefit.
The IRS says that about 600,000 Americans claimed an alimony deduction on their 2015 tax returns, the most recent year for which data is available.